Question

Spring Designs & Decorators issued a 180-day, 5% note for $82,600, dated April 13 to Jaffe Furniture Company on account.

Required:

A.	Determine the due date of the note.
B.	Determine the maturity value of the note. Assume a 360-day year when calculating interest.
C.	Journalize the entries to record the following: (1) receipt of the note by Jaffe Furniture and (2) receipt of payment of the note at maturity. Refer to the Chart of Accounts for exact wording of account titles.

LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

A. Determine the due date of the note.

B. Determine the maturity value of the note. Assume a 360-day year when calculating interest.

C. (1) Journalize the entry to record the receipt of the note by Jaffe Furniture. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

C. (2) Journalize the entry to record the receipt of payment of the note at maturity. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3

Answer 1

Solution a:

Due date of note = April 13 + 180 days = 10 October

Solution b:

Maturity value of note = Face value + Interest = $82,600 + $82,600*5%*180/360 = $84,665

Solution c:

DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
13-Apr	Note receivables Dr		$82,600.00		↑
	To Sales			$82,600.00			↑

DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
10-Oct	Cash Dr		$84,665.00		↑
	To Note receivables			$82,600.00	↓
	To Interest revenue			$2,065.00			↑